SaaS Software Cloud Update – August 2018

Navidar | September 10, 2018


Public Markets and M&A Activity

The Navidar SaaS Software Cloud Index increased by 11.1% in Aug and advanced 32.4% so far in 2018, compared with the NASDAQ’s +5.7% and +17.5%, the Russell 2000’s +4.3% and +13.5%, and the S&P 500’s +3.0% and +8.5%, respectively. The following is a summary of the company-specific issues related to selected stocks in our coverage universe that meaningfully overperformed or underperformed as well as relevant M&A activity.

Apple (NASDAQ: AAPL +19.6%)the iPhone maker reported strong 3Q18 earnings. AAPL witnessed their strongest growth rate in 11 quarters, with revenues growing by 17% YoY to $53.3B, driven by continued strong sales of iPhone, services and wearables. The Company registered 40% YoY growth in earnings to $2.34 per share, led by a boost from share repurchases and a lower tax rate as a result of the 2017 Tax Act. AAPL returned almost $25B to investors through its capital return program during 3Q18, including $20B in share repurchases. The Company provided a forecast for 4Q18, expecting revenues to be in the range of $60-62B.

Alteryx (NYSE: AYX +48.9%)the data analytics software provider reported strong 2Q18 results, with both revenues and earnings exceeding analyst expectations. AYX revenues jumped 54% YoY to $46.8M and earnings per share came in at a loss of $0.09, remaining flat compared to the prior-year period and $0.01 above analyst expectations. The Company benefited from rising recurring revenue, saw its gross margins increase and experienced a significant jump in customer growth. AYX raised its revenue outlook for the full year, expecting revenues to be in the range of $191-193M, greater than the earlier guidance of $183-186M.

Paycom Software (NYSE: PAYC +46.0%)the human capital management software provider reported strong 2Q18 results, with revenues growing YoY by 31% to $128.8M, exceeding analyst estimates and management guidance. PAYC adjusted EBITDA increased 46.2% YoY to $53.5M. The Company reported earnings of $0.59, beating analyst estimates of $0.49 per share. PAYC raised its guidance for 2018, with revenues now anticipated to be in the range of $554-556M, up from the previous expectation of $545-547M. Adjusted EBITDA is expected to be in the range of $231-233M, up from previous guidance of $220-222M.

Benefitfocus (NASDAQ: BNFT +46.5%)the human resources software provider reported better than expected 2Q18 results. BNFT revenues exceeded analyst estimates by 7% to $60.6M for the quarter. The Company reported a quarterly loss of $0.24 per share versus the street estimate of a loss of $0.40 per share. BNFT expects full-year earnings to fall between a loss of $0.72-0.54 per share, with revenue ranging between $253-258M.

Veeva Systems (NYSE: VEEV +38.0%) the cloud-based software services provider reported better than expected 2Q19 results. VEEV revenues jumped 25% YoY to $209.6M, beating analyst estimates and management guidance. Earnings per share grew 63% YoY to $0.39, $0.06 better than management prediction and ahead of analyst estimates. The Company boosted its guidance for the full year, with revenues now expected to grow 21% to $828M; earnings per share is expected to grow 47% to $1.37 per share.

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